15/02/2017 How 

it works: Blockchain explained in 500 words | ZDNet

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How it works: Blockchain explained in 500 words

If electronic money is just data, nothing physically stops a currency holder
trying to spend it twice. Enter the Bitcoin blockchain.

By Steve Wilson for Constellation Research | February 15, 2017 -- 16:53 GMT (08:53 PST) | Topic: Banking

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Blockchain is an algorithm and distributed data structure designed to manage electronic cash
without any central administrator. The original blockchain was invented in 2008 by the
pseudonymous Satoshi Nakamoto (http://www.zdnet.com/article/bitcoins-mysterious-creator-revealed/) to
support Bitcoin, the first large-scale peer-to-peer crypto-currency, completely free of
government and institutions.

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15/02/2017 How it works: Blockchain explained in 500 words | ZDNet

Blockchain is a Distributed Ledger Technology (https://en.wikipedia.org/wiki/Distributed_ledger)

● (DLT).
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Most DLTs have emerged in Bitcoin's wake. Some seek to improve blockchain's efficiency, speed
or throughput; others address different use cases, such as more complex financial services,
identity management, and "Smart Contracts".

The central problem in electronic cash is Double Spend. If 10 STEPS

electronic money is just data, nothing physically stops a

currency holder trying to spend it twice. It was long thought
that a digital reserve was needed to oversee and catch double-
spends, but Nakamoto rejected all financial regulation, and
designed an electronic cash without any umpire.

(http://www.zdnet.com/article/how-
The Bitcoin (BTC) blockchain crowd-sources the oversight.
to-secure-your-iot-deployment-in-
Each and every attempted spend is broadcast to a community,
which in effect votes on the order in which transactions occur. 10-steps/)
How to secure your IoT
Once a majority agrees that all transactions seen in the recent
deployment
past are unique, they are cryptographically sealed into a block. (http://www.zdnet.com/article/how-
to-secure-your-iot-deployment-in-10-
A chain thereby grows, each new block linked to the previously
steps/)
accepted history, preserving every spend ever made.
Seemingly every day there's
Also: Blockchain Global scoops up Digital X's bitcoin liquidity another story about Internet
desk (http://www.zdnet.com/article/blockchain-global-scoops-up-digital- of Things devices being
xs-bitcoin-liquidity-desk/) | IBM bets on the blockchain to keep your compromised or used for
medical data safe (http://www.zdnet.com/article/ibm-bets-on-the- large-scale attacks. Here's
blockchain-to-keep-your-medical-data-safe/) | Stop overhyping how to ensure that your
blockchain (http://www.zdnet.com/article/stop-overhyping-blockchain/) deployment remains secure.

A Bitcoin balance is managed with an electronic wallet, which Read More

(http://www.zdnet.com/article/how-
protects the account holder's private key. Blockchain uses
to-secure-your-iot-deployment-in-10-
conventional public key cryptography to digitally sign each steps/)

transaction with the sender's private key and direct it to a

recipient's public key. The only way to move Bitcoin is via the
private key: lose or destroy your wallet, and your balance will remain frozen in the ledger, never
to be spent again.

The blockchain's network of thousands of nodes is needed to reach consensus on the order of
ledger entries, free of bias, and resistant to attack. The order of entries is the only thing agreed
upon by the blockchain protocol, for that is enough to rule out double spends.

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The integrity of the blockchain requires a great many participants (and● consequentially the
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notorious power consumption). One of the cleverest parts of the BTC blockchain is its incentive
for participating in the expensive consensus-building process. Every time a new block is
accepted, the system randomly rewards one participant with a bounty (currently 12.5 BTC). This is
how new Bitcoins are minted or "mined".

Blockchain has security qualities geared towards incorruptible cryptocurrency. The ledger is
immutable so long as a majority of nodes remain independent, for a fraudster would require
infeasible computing power to forge a block and recalculate the chain to be consistent. With so
many nodes calculating each new block, redundant copies of the settled chain are always
globally available.

Contrary to popular belief, blockchain is not a general purpose database or "trust machine". It only
reaches consensus about one specific technicality - the order of entries in the ledger - and it
requires a massive distributed network to do so only because its designer-operators choose to
reject central administration. For regular business systems, blockchain's consensus is of
questionable benefit.

YOUR POV
How is your organization implementing blockchain? Take Constellation's 2017 CIO Priorities
Survey (https://www.surveymonkey.com/r/cio2017zdnet). Constellation will send you a summary of the
results.

How blockchain technology can transform our... (/pictures/how-blockchain-technology-can-transform-

our-world/)

SEE FULL GALLERY (/pictures/how-blockchain-technology-can-transform-our-world/)

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Video: Secure your clouds across
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AWS, Azure, and more US
At RSA 2017, we spoke with Tom Gillis, CEO of Bracket Computing, about how
his product is changing cloud security and bringing big enterprise customers
to the cloud.

By Jason Hiner | February 14, 2017 -- 16:23 GMT (08:23 PST) | Topic: Cloud TV - Video Series

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